Meta Slashes Reality Labs Budget by 20% – Here is Why

Meta is set to slash its Reality Labs budget by 20% by 2026, a strategic move aimed at realigning the division’s focus and managing costs.

This decision coincides with Meta’s plans to transition Reality Labs from a development phase to a production phase in preparation for several high-profile hardware launches. Analysts from Bank of America anticipate that this budget cut could result in savings of approximately $3 billion for the company.

The timing of this budget reduction aligns with Meta’s upcoming earnings report on July 31, following a strong Q1 2024 where the company’s revenue reached $36.45 billion, a 27% increase from the previous year.

Despite this revenue growth, Reality Labs reported a significant $3.8 billion loss for the quarter, partly due to investments in areas beyond metaverse development, such as artificial intelligence. Mark Zuckerberg has hinted at this shift in focus, stating that more of Reality Labs’ resources are being directed towards AI initiatives.

The decision to cut costs comes after Reality Labs has accumulated losses of about $55 billion since its inception in 2019. Meta’s future in the metaverse depends on the success of its upcoming products, including the next-generation Quest VR headset, Ray-Ban smart glasses with visual capabilities, and a wrist-worn neural interface.

Additionally, a prototype for a full-holographic headset is in development, though its release timeline remains uncertain. The company’s ability to attract mainstream consumers with these new technologies will be crucial in determining the future of Reality Labs and its role within Meta’s broader strategy.